Meaford's infrastructure gap shrinks

Meaford's infrastructure gap shrinks

Graphic provided by Michael Humble

The graphic shows that Meaford's infrastructure deficit (the difference between how much the municipality spends on capital projects and how much it amortizes as depreciation on its balance sheet each year) is shrinking. The infrastructure deficit is not an actual financial deficit. It is a number used by the finance department to calculate how much the municipality should be spending on its capital program every year. Ideally, capital spending would equal amortization each year. Deputy Treasurer Michael Humble called this slide the "most important" of his budget presentation to council.

The Municipality of Meaford continues to have an infrastructure deficit, but that deficit is shrinking every year and could disappear all together in a few years.
The infrastructure deficit is not an actual financial deficit that costs the municipality money - in reality it is the difference between what the municipality invests each year in its capital works program and what it reports as asset depreciation on its balance sheet.
Meaford CAO Denyse Morrissey and Deputy Treasurer Michael Humble stressed to council at its budget meeting on November 12 that the municipality's finance department is concentrating on closing that infrastructure gap in order to become more sustainable in the long run. Humble called the slide in his presentation about the gap the "most important" in his entire budget presentation.
Humble explained that each year the municipality's total amortization - on its balance sheet - amounts to approximately $4 million. Humble said that number is not an actual financial figure, but represents how much the municipality's assets depreciated during the course of the year. Investments in the capital program are the best way to offset that number.
"It's not an actual financial expense. It's a measure of usage of our assets over time," Humble explained. "It is used to predict how much we should be putting away (into reserve) to replace our assets over time. This is the essence behind asset management," he explained.
In 2013 municipal staff will be producing an Asset Management Plan that will be a formal report that deals with infrastructure needs and future capital spending requirements.
For the past few years the municipality's capital budget has been growing. Humble's slide clearly showed that capital spending has been increasing in recent years due to the five-year financial plan.
"We have been diverting as much funding as possible to capital projects," Humble explained to council
In the 2013 budget the capital program is growing from $1.4 million in 2012 to $2.1 million in 2013. The 2013 capital budget is fully financed; the municipality is not issuing any new long-term debt for its capital program.
Humble said the ideal situation would be to see capital spending equal annual amortization on the balance sheet every year. Under that scenario, which the municipality is close to achieving, Meaford would be investing in its assets at the same rate as they depreciate.
"We have prepared a very fiscally responsible operating budget so we can divert as much money as we can to reduce this gap," Humble explained to council.
During the presentation Mayor Francis Richardson pointed out that most municipal government's have infrastructure gaps.
"We're not unique and we're not in the worst position," commented the Mayor.
Humble said Meaford's gap is situated in about the middle of the pack. Humble said the implementation of the five-year plan has allowed the municipality to gradually close the gap each year. He said for some municipalities the gap is so large that closing it would require massive spikes in taxation - a proposition that is politically unfeasible and simply not realistic in today's economy.
"Many municipalities don't fund their capital replacement program at all," said Humble.
Councillor Lynda Stephens said it is gratifying to see the municipality's plan working.
"We are heading in the right direction," she said.
Meaford is spending $2,128,600 on capital projects in 2013. Here is how that spending breaks down by department.
* Operations: $1,315,000
* Community Services: $385,000
* Planning and Building: $75,000
* Information Technology: $169,000
* Emergency Services: $144,600
* Library: $40,000
The funding sources for the capital budget are as follows:
* Grants and subsidies: $40,000
* Provincial Gas Tax: $110,000
* Federal Gas Tax: $334,000
* Cash in Lieu of Parkland: $64,000
* Municipal capital reserve: $1,580,600